Yugoslavia is in default on its $14 billion of
external debt. Then there is $1.7 billion owed to
the World Bank. If Yugoslavia wants any more
money [from the IMF], it will have to start
paying its creditors off. It will also have to
swallow the standard IMF bitter medicine: Pay
cuts, an end to subsidies, "flexible labor
markets, the closure of "uncompetitive"
industries. Thus will Yugoslavia become
impoverished, yet "competitive". And
some day, perhaps, the standard of living will
return to its current level.

There was always something extraordinarily na´ve
about the idea that once Yugoslav President Slobodan
Milosevic was out of power, the West would rush to
Belgrade, check book in one hand, fountain pen in the
other. The eight years of sanctions, not to mention the
extensive bombing were not directed against one man. US
Government officials have said on innumerable occasions
that they considered the Serbs to have been the
instigators of the Balkan wars of the past decade. The
Serbs real crime, of course, was "nationalism"in
other words, opposition to the policies of the US
Government. And now they will have to be punished for it.
While very little economic aid is forthcoming, Western
policymakers are not hesitating making one demand after
another on the new Government in Belgrade.

Last week President Vojislav Kostunica announced that
he would visit Bosnia to attend the reburial of Serb poet
Jovan Ducic, who died 57 years ago in the United States.
Wolfgang Petritsch, the so-called High Representative in
Bosnia (a term redolent of the old position of colonial
High Commissioner) announced that he was disturbed that a
President of Yugoslavia should visit Bosnia. He demanded
an explanation. Petritsch met Kostunica and afterwards
professed himself satisfied that the "visit was of a
purely private nature". Nevertheless, Yugoslavia and
Bosnia must establish diplomatic relations as soon as
possible, he insisted. As far as financial aid was
concerned, Petritsch announced that Yugoslavia would
receive about $ 180million. However, this money is
Yugoslavias already. It is to be realized through
the distribution of the countrys gold reserves with
the Bank for International Settlements in Basle.

As far as more money is concerned, Kostunica will have
to wait. In a recent article in the Financial Times,
Petritsch wrote: "Hundreds of millions of euros in
aid should not be allowed to flood into Yugoslavia
without some strings attached". Kostunica would
first have to recognize Bosnia and "establish
diplomatic relations". Petritsch then went on to
issue a threat: "I suggest to Mr. Kostunica
that the surest way of securing Kosovo, where Serbs have
just as much right to live as ethnic Albanians, is to
recognize Bosnian sovereignty. Then the international
community will be honor bound to ensure a future for
Serbs there as was agreed under UN Security Council
Resolution 1244". This is essentially blackmail. The
so-called "international community" will adhere
to international law provided Serbs meet its requirements.
Of course, the requirements can change at any time. In
which case, treaties and UN Resolutions will be ignored.
Petritsch concluded his article with the inevitable
demand: "If Yugoslavia wants to regain full
membership of the UN, it should be willing to work with
its institutions. That includes the war crimes tribunal
in The Hague".

The other day Petritsch met his "friend"
Zoran Djindjic. According to the joint statement issued
after their meeting, "the state bodies of the FRY
should support the democratic process in Bosnia-Herzegovina
and refrain from supporting any political party".
This was an odd declaration, to say the least. Leading
Democratic Opposition figures have been actively involved
in the upcoming election campaign in Bosnia. The approved
Presidential candidate of the Western powers, Milorad
Dodik, is in some trouble. He is only President because
the previous High Representative, Carlos Westendorp, had
dismissed the elected President, Nikola Poplasen, for
failing to conform to the requirements of the "international
community". Dodik is obviously badly in need of a
boost, so Western officials are shipping in Kostunica
supporters in the hope that some of their glory will rub
off on him. Attending a recent election rally in
Bijeljina in northeastern Bosnia was Belgrade Mayor Milan
Protic. He said that the Serb Republic of Bosnia had
supported and helped the DOS, and "that was why DOS
members had come to the rally to share their joy
with the citizens of the Serb Republic, as the democratic
victory in Serbia was a victory for the whole Serb people".
Also in attendance was Vladan Batic, leader of the
Christian Democratic Party. He was for Dodik, he
explained, because Dodik "had always supported the
DOS." Vuk Obradovic, leader of the Social Democrats,
was also there. He supported Dodik because he "had
supported all the major battles of DOS against Slobodan
Milosevic and helped democracy win in Serbia". Also
in attendance was the ubiquitous Velimir Ilic, Mayor of
Cacak.

Milorad Dodik himself is under no illusions as to how
seriously Western powers take elections. An election
victory by the dread Serb Democratic Party (SDS) in the
upcoming elections, he recently stated (perfectly
correctly), would lead to an end to international aid and
the isolation of the Serb Republic: "If the SDS won
the election, international aid would be halted, the Serb
Republic would become isolated and all the stand-by
arrangements with the IMF and World Bank would cease".

Perhaps the Bosnian Serbs would not be losing all that
much.

Kostunica, having dismissed the Hague Tribunal as a
political body driven by an anti-Serb agenda, now findsto
his surprise apparentlythat the Western powers are
not about to jettison their prize creation. In recent
days, Kostunicas supporters have been suggesting
that Slobodan Milosevic would be put on trial in
Belgrade, not at The Hague. Not for "war crimes"
to be sure, but for "corruption" and "vote
rigging". They are putting out chilling tales of
Milosevic embezzling funds, rigging elections and
transferring millions of dollars into foreign bank
accounts. "There is a lot of evidence which should
lead to Milosevics arrest", says Mayor of
Cacak, Velimir Ilic. Quite how a Mayor of Cacak can
possibly know that "there is a lot of evidence"and
this a mere two weeks after the overthrow of Milosevicis
a bit of a mystery. Mladjan Dinkic of the economic think-tank
G17 today heads the National Bank He claims the level of
embezzlement and corruption during the Milosevic era was
"huge". It need hardly be pointed out that
lurid tales of "corruption" and "embezzlement"
in the previous era are a very useful way of distracting
the publics attention from the economic failures of
the current era.

The US media and policy elites remain unimpressed by
these loud condemnations of Milosevic. They could not
care less about Milosevics alleged "corruption"
or "vote rigging". They want him punished for
"nationalism". Kostunica, having sold himself
as a Serb "nationalist" who can, nonetheless,
work harmoniously with the Western powers, now has to
choose between "nationalism" or good
international relations. Since
Kostunica had promised in his election campaign that he
can deliver economic aid from the West, he now has
little choice but to follow the path of accommodation. He
is busily disowning the Serb "nationalism" he
once professed, while cheerfully accepting "guilt"
for war crimessomething he had said he would never
do. In the "60 Minutes" interview on CBS he
declared: "But those are the crimes and the people
who were killed are victims. I must say also there are
crimes on the other side and the Serbs have been killed.
I am ready to accept the guilt for all those people who
have been killed. I am trying to take responsibility for
what happened on my part. But what Milosevic has done as
a Serb I dont take responsibility for many of these
crimes". Kostunicas reluctance to dispute
these accusations, to mount even a half-hearted defense
on behalf of his countrymen was staggering in its
abjectness. The CBS interviewer asked him: "Is there
any doubt in your mind that Milosevic is guilty of crimes
against humanity?" Kostunicas response: "Yes,
well he is among those responsible". In which case,
the interviewer asked, "why has your government not
arrested him?" Kostunica responded with his by-now
familiar mantra: "Ah, there are too many things to
be done at this moment, too many priorities".

One of these priorities is to get hold of some cash.
But the powers that be will not be whipping out their
checkbooks any time soon. Yugoslavia has been seeking $500million
from international donors to help finance imports of
food, medicines, medical equipment, and fuel. The
Government wanted the money right away. "Much better
we have $100million right now than $500million in a years
time" says acting Yugoslav Prime Minister Miroljub
Labus, "We took big risks making these promises in
the election campaign. Now we are vulnerable. If the West
wants to build stability in the region it must build
stability here". But, instead of the expected $500
million, Yugoslavia has been offered something on the
order of $173 million. The European Union has also
declared that it plans to support the revival of Serbian
economy with a total of 2.3 billion euros (around $1.8
billion) by the end of 2006. The sum sounds large. In
reality it is a pittance. Tiny Montenegro has received a
lot more, just for pushing for independence from Serbia.
The United Nations special envoy for the Balkans, Carl
Bildt, informed Belgrade the other day not to expect
large amounts of financial aid: "You are not
interested in making a Third World economy dependent on
handouts".

The
attitude of the IMF is much the same. IMF External
Relations Department head Thomas Dawson has already made
clear that before Yugoslavia is even considered for
membership of the IMF it will have to clear up the matter
of the debt: "There needs to be first a clear
agreement on how to clear the arrears of about $128
million to the Fund". Yugoslavia is also in default
on its $14 billion of external debt. Then there is $1.7
billion owed to the World Bank. If Yugoslavia wants any
more money, it will have to start paying its creditors
off. It will also have to swallow the standard IMF bitter
medicine: Pay cuts, an end to subsidies, "flexible"
labor markets, the closure of "uncompetitive"
industries. Thus will Yugoslavia become impoverished, yet
"competitive". And some day, perhaps,
the standard of living will return to its current level.
Earlier this year the IMFs Stanley Fischer was in
Bulgaria speaking enthusiastically, as usual, about the
transition to a market economy. If the Balkan countries
continued "down the path of reform . . . [then] . .
. these efforts will ultimately be rewarded".
Bulgaria had to continue with its structural reform
program if it was "to achieve its ambition of
joining the EU in the next few years and to begin to
catch up on West European living standards". But
output per head in Bulgaria, as a recent article in the Guardian
pointed out, is still down at around a third of its 1989
level.

Even before the arrival of the boys from the IMF,
Yugoslavias new rulers have adopted an IMF-style
program. Price
controls have ended. The results were predictable:
The price of bread has doubled, and the price of cooking
oil has tripled. The Government was quick to find the
culprit for this debacle. It was all the fault of
Milosevic and his supporters. According to Miroljub
Labus, "their strategy now is to do anything they
can to turn the economy into chaos". Meanwhile, the
"international community" is preparing another
large dose of bitter medicine for Kostunicas
Government to swallow. Earlier this week a commission set
up by Swedish Prime Minister Goran Persson handed UN
Secretary General, Kofi Annan a report recommending so-called
"conditional independence" for Kosovo. "Conditional
independence" is just a polite way of saying "independence".
Doubtless, Kostunica will protest that this would violate
UN Security Council Resolution 1244. And doubtless he
will be reminded, as he has already been on many
occasions over the last three weeks, that he is only
nominally in charge in Yugoslavia. The countrys real rulers
reside elsewhere.

***

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